Nine Entertainment (NEC) has joined its rival, Seven West Media (SWM) in forecasting continuing pressure in the TV advertising market for 2016-17. Nine’s annual shareholder meeting was told yesterday by CEO Hugh Marks that its metro free-to-air advertising revenue expected to suffer a low single-digit fall in the year to June 30, 2017.
“While there is some forward positive commentary about the market, we don’t expect that to translate to outcomes until calendar year 2017, with this being assisted by implementation of new trading systems by Nine and across the industry," Mr Marks told the meeting in Sydney.
In saying that he joined his Seven counterpart, Tim Worner who told Seven’s AGM earlier this month that "While the advertising market has remained soft, we have undertaken further cost out initiatives. We previously guided cost growth at CPI but we now expect group costs to be flat year on year including the uplift cost of the AFL rights but excluding Olympics and 3rd party commissions.”
Seven had warned in its August profit outlook that it was looking for earnings before interest, tax, depreciation and amortisation to be down 15% to 20%.
Now Seven sees earnings being a bit softer ”We issued underlying EBIT guidance at our 2016 financial year results. At this stage we expect to be at the lower end of that range. The first half will be lower than the guided full year underlying EBIT trend given the impact of the Olympics rights falling in the first half.”
While the Nine meeting wasn’t given any guidance along the lines of that from Seven, the impression was certainly left that it will be another tough year.
“After a first quarter [advertising] market decline of around 4 per cent, it appears likely metro Free-To-Air advertising revenue will be down in the low single digits for 2016-17.
"While there is some forward positive commentary about the market we don’t expect that to translate to outcomes until calendar 2017 with this being assisted by the implementation of new trading systems by Nine and across the industry," Mr Marks said. The company is looking for 2016-17 TV television costs to be 1.5% lower than the previous year, with an additional $50 million cost reduction planned by the 2019 financial year.
But the current financial year will benefit from one off benefits from Nine’s brief time as a 9.9% shareholder in its regional affiliate and would be merger partner, Southern Cross Media.
That delivered $2.5 million in dividends before nIne sold in late September, reaping a $30 million profit which it says will be reinvested in the company’s 2017 programming and the Stan streaming video JV with Fairfax Media.
Yesterday’s meeting saw Nine’s biggest shareholder, Bruce Gordon (owner of its former regional affiliate, WIN Corporation) vote against the company’s remuneration report, but the move was not enough to deliver a “first strike” against the company.
WIN owns a 14.9% stake in Nine through his investment vehicle Birketu (and a similar stake in the struggling Ten Network where WIN is now the regional affiliate).
The relationship between WIN and Nine has been strained since April, when Nine ditched a near 30-year relationship with WIN and signed a five-year affiliation agreement with Southern Cross.
That promoted a court battle between the two companies as WIN objected to Nine’s streaming service being offered in regional markets. WIN lost that case on appeal.
Nine shares edged up an unconvincing 2.7% to 94.5 cents, Seven West shares were barely higher at 68 cents, a rise of just 0.7% on the day.
